Even as India grapples with the second wave of the coronavirus outbreak, the United Nations has raised the country’s growth forecast by 0.2 per cent to 7.5 per cent for the fiscal year 2021.
However, the UN cautioned that the growth outlook of India was “highly fragile” as it is the “new hotbed of the coronavirus outbreak”.
The World Economic Situation and Prospects (WESP) released on Tuesday estimated that the Indian economy would grow at 10.1 per cent in the calendar year 2022, nearly double the 5.9 per cent growth projections for the country in its January report.
With the forecast of 10.1 per cent in 2022, India will become the fastest-growing major economy in the world, moving past China, which is predicted to grow at 5.8 per cent, markedly slower than the 8.2 per cent growth estimates for the year 2021.
Dr Aurodeep Nandi of Nomura says the downturn in the economy due to coronavirus outbreak is fleeting and less severe
Meanwhile, with India currently in the throes of the resurgent coronavirus outbreak, the Nomura India Business Resumption Index (NIBRI) fell to 64.5 for the week ended May 9 from 69.7 the prior week (i.e., 35.5pp below pre-pandemic levels). The drop in the NIBRI could be attributed to the rolling state-wide lockdowns that are having a debilitating effect on the sequential growth.
However, Dr Aurodeep Nandi of Nomura is upbeat on India’s resilience, stating that the effect on the GDP this time around will be likely lesser than the previous year. In an interview with the ET Now, Nandi said that in the last year’s lockdown, India was down by about 55 per cent levels. However, this year, the slump is relatively less as the indices suggest that India is down by 35 per cent vis-a-vis pre-pandemic levels.
Elaborating on how the downturn in the economy due to the second wave of the COVID-19 outbreak will be limited, Nandi explained that the first wave brought with it an element of shock and surprise, which devastated the economy. However, in the second wave, he argues, the economy and the consumers have grown used to the pandemic. Therefore, the damage to the economy this time is likely limited, he said.
Moody’s slashes India’s growth forecast to 9.3 per cent for the current fiscal year
Additionally, Moody’s Investor Services on Tuesday lowered India’s growth forecast for the current financial year to 9.3 per cent, stating that the second wave of the coronavirus outbreak restricts economic recovery and poses a risk of longer-term scarring.
The US-based ratings agency had forecasted 13.7 per cent growth for India in the month of February.
“The surge of the virus, which has been driven by a highly contagious variant, has put significant strain on India’s healthcare system with hospitals overrun and medical supplies in short supply,” Moody’s said.
However, it added that the impact of the lockdowns induced by the second wave of the coronavirus outbreak is not going to be as severe as the first wave. In the first wave, strict nationwide lockdowns were imposed to curb the spread of the virus. But in the second wave, localised lockdowns are being imposed, with only those area affected by the contagion being locked under. Businesses and customers have also grown accustomed to this new normal, Moody’s said.
Just as India’s economy was limping back to normal, the country was hit by a second wave of the coronavirus outbreak in March 2021, this time with a more virulent strain of the virus, prompting states and cities to impose lockdowns and restrict public movement. As a result, the economy and the businesses took a hit as state and local government enforced localised lockdowns to curb the spread of the virus.